The crackdown begins in July, ISPs hope for bigger profits by serving less bandwidth

If you're a customer of Time Warner Cable (TWC), Comcast Corp. (CMCSA), or Verizon Wireless, a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group Plc. (LON:VOD), and you happen to also be a pirate of copyrighted content, you may soon find yourself warned or even have your service terminated.

I. Your ISP is Out to Get You, Pirate!

The aforementioned internet service providers (ISPs) have volunteered to be part of a fledgling effort by the Recording Industry Association of America (RIAA). RIAA CEO and chairman Cary Sherman announced the news during his speech to a panel of publishers on Wed.

Traditionally, the RIAA's anti-filesharing efforts have consisted of extorting alleged filesharers under the threat of legal action. In some cases the individuals were clearly wrongly targeted, and the approach was highly technically unsound, given that an IP address did not equate to a personal identity. Thus the approach was roundly criticized.

Fritz Attaway, executive vice president of the Motion Picture Association of America (left) and Cary Sherman of the Recording Industry Association of America, on Wed. announced their orgs. new partnership with top ISPs to kill piracy. [Image Source: Greg Sandoval/CNET]

While the new methodology shares some of the same dangers of false accusations, it will at least be less fiscally damaging to the accused. Supporters plug the program, saying that the only way to truly stop piracy is to kill it at the gate -- the user's internet connection.

That said, significant technical questions surround how ISPs will be able to determine real time streams of copyrighted content being transferred over P2P versus legal P2P traffic.

II. Why are the ISPs Cooperating?

One of the big questions that may be hot on the minds of many is why the ISPs would cooperate with the RIAA scheme? Well, for a long time many ISPs were wary of cutting off paying customers.

But gradually some ISPs have come to embrace the RIAA's perspective.

It's possible that the RIAA has promised its partners some sort of payments to help them set up their enforcement systems. After all, it was willing to pay $64M between 2006 and 2008 to win $1.4M USD from individual pirates.

Money -- either direct payments from the RIAA or the suggestion of bigger profits via serving less bandwidth -- has convinced the ISPs to turn on their filesharing customers.[Image Source: Flickr/Exif]

Also, the ISPs may believe that while they may have to cut a handful of customers, the majority will simply stop sharing after warnings. Ultimately this would mean that the ISPs customers would be paying the same amount for their service, but would likely be consuming far less bandwidth (as filesharing is very data hungry). Thus the ISPs ultimately may hope to crank up their profits by threatening their customers into quitting their pirate ways.

Of course not all ISPs are likely onboard. Implementation of the scheme will likely be expensive, though it may yield a net payoff, depending on how well it works at discouraging piracy. Smaller ISPs -- such as municipal Wi-Fi, small carriers, and other players -- may find it infeasible to adopt a similar scheme. After all, Comcast, TWC, and Verizon are some of the biggest ISPs in America.

Ultimately the RIAA's goal, though, will be to try to force (via lobbying the government) all ISPs to join the effort, regardless of financial feasibility. This ultimately represents a big financial risk to small ISPs, as the current atmosphere in Washington D.C. is very pro-RIAA, thanks to their generous bribes campaign contributions.

III. When Will the Plan Arrive?

According to CEO Sherman, ISPs will begin to implement the plan on July 12. Thus far Comcast, Verizon Wireless, and Time Warner Cable are the only confirmed participants.

It may take up to a year for the monitoring system to be fully in place and for threats to begin, he states, commenting, "Each ISP has to develop their infrastructure for automating the system. [This is needed] for establishing the database so they can keep track of repeat infringers, so they know that this is the first notice or the third notice. Every ISP has to do it differently depending on the architecture of its particular network. Some are nearing completion and others are a little further from completion."

According to the RIAA, the threats to filesharers will operate on the "graduated response" principle (which elsewhere has been referred to as a "three strikes" plan or President Obama's proposed "six strikes" plan). On the first incident customers will be sent a warning email, which requests they confirm that they received the notice.

If the system detects them to be sharing more times, they will face increasing action, including possible cancellation of their service or throttling. Given how contract law works in America, it is possible that customers in yearly contracts could be obligated to continue to pay for the services they are no longer receiving.

The big question, with respect to how much backlash the proposal will create, will be accuracy.

If Comcast, et al. start sending threats to non-pirate customers (for example World of Warcraft patches are delivered via P2P and many artists distribute free -- and legal -- music via P2P as a promotional tool), it could turn into a massive embarrassment.

The black mark of a false positive could lead subscribers to abandon an ISP in mass.

In that regard the ISPs are playing with fire, to an extent, and could get burned. However, the potential damage may be mitigated by the fact that these same ISPs enjoy a collective monopoly on high-speeds services in many regions. In other words, even if they're all operating in an abusive manner, customers may have no other options in the area.

Still customers have a powerful equalizer in the class action lawsuit. If the ISPs do act abusively, regardless of competition or the lack thereof, users could punish them if they can find a sympathetic court that's willing to give them a fair trial.

The RIAA and MPAA are selling them on the promise of reduced bandwidth and higher profits. However, the ISPs should beware this deal with the devil -- if they botch their new job as "copyright cops", it could cost them dearly.